Depends on the payroll company. And it depends on whether they are cloud-based and which region they are hosting in the cloud. And it depends on whether the payroll software offers the feature to disable federal tax deductions from pay checks. And it depends on whether the employer using that software enabled that feature, and if they are willing to face the consequences from a vindictive government.
Edit: basically it’s a lot more complicated than just “screw it, we as a state just won’t pay our federal taxes!”, unfortunately.
What state is the payroll software company’s HQ in and where are their servers?
Depends on the payroll company. And it depends on whether they are cloud-based and which region they are hosting in the cloud. And it depends on whether the payroll software offers the feature to disable federal tax deductions from pay checks. And it depends on whether the employer using that software enabled that feature, and if they are willing to face the consequences from a vindictive government.
Edit: basically it’s a lot more complicated than just “screw it, we as a state just won’t pay our federal taxes!”, unfortunately.